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SWEDEN
45. Agreement for
avoidance of double taxation and prevention of fiscal evasion with Sweden* Whereas
the annexed Convention between the Government of the Kingdom of Sweden and the
Government of the Republic of India for the Avoidance of Double Taxation and
the Prevention of Fiscal Evasion with respect to taxes on income and on capital
shall come into force, on the twenty-fifth day of the December, 1997, thirty
days after the receipt of the letter of the notifications by both the
Contracting States to each other of the procedures required under their laws
for bringing into force of the said Convention in accordance with Article 30 of the said Convention; Now,
therefore, in exercise of the powers conferred under section 90 of the
Income-tax Act, 1961 (43 of 1961) and section 44A of the Wealth-tax Act, 1957
(27 of 1957), the Central Government hereby directs that all the provisions of
the said Convention shall be given effect to in the Union of India. Notification :
No.
GSR 705(E), dated 17-12-1997 Annexure CONVENTION
BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA The
Government of the Republic of India and the Government of the Kingdom of
Sweden, desiring to conclude a Convention for the Avoidance of Double Taxation
and the Prevention of Fiscal Evasion with respect to taxes on income and on
capital and with a view to promoting economic co-operation between the two
countries, have agreed as follows : ARTICLE
1 : Personal scope - This Convention shall apply to persons who are
residents of one or both the Contracting States. ARTICLE
2 : Taxes covered - 1. This Convention shall apply to taxes
on income and on capital imposed on behalf of a Contracting State or of its
political sub-divisions or local authorities, irrespective of the manner in
which they are levied. 2. There
shall be regarded as taxes on income and on capital all taxes imposed on total income,
on total capital, or on elements of income or of capital, including taxes on
gains from the alienation of movable or immovable property, taxes on the total
amounts of wages or salaries paid by enterprises, as well as taxes on capital
appreciation. 3. The
existing taxes to which this Convention shall apply are in particular : (a) in India : (i) the income-tax, including any surcharge
thereon; and (ii) the tax on capital (the wealth-tax); (hereinafter referred to as Indian tax); (b) in Sweden : (i) the income-tax, including the national
income-tax (den statliga inkomstskatten), including the tax on employees at sea
(sjmansskatten) and the withholding tax on dividends (kupongskatten); (ii) the income-tax on non-residents (den
sarskilda inkomstskatten for utomlands bosatta); (iii) the income-tax on non-resident artistes and
athletes (den srskilda inkomstskatten for utomlands bosatta artister m.fl.); (iv) the municipal income-tax (den kommunala
inkomstskatten); (v) the tax on means intended for expansion
purposes (expansionsmedelsskatt); and (vi) the net wealth-tax; (hereinafter
referred to as Swedish tax). 4. The
Convention shall apply also to any identical or substantially similar taxes
which are imposed after the date of signature of the Convention in addition
to, or in place of, the existing taxes referred to in paragraph (3). The
competent authorities of the Contracting States shall notify each other of any
substantial changes which have been made in their respective taxation laws. ARTICLE
3 : General definitions - 1. For the purposes
of this Convention, unless the context otherwise requires : (a) the term India means the territory of India
and includes the territorial sea and airspace above it, as well as any other
maritime zone in which India has sovereign rights, other rights and
jurisdiction, according to the Indian law and in accordance with international
law, including the U.N. Convention on the Law of the Sea; (b) the term Sweden means the Kingdom of Sweden
and, when used in a geographical sense, includes the national territory, the
territorial sea of Sweden as well as other maritime areas over which Sweden in
accordance with international law exercises sovereign rights or jurisdiction; (c) the terms a Contracting State and the other
Contracting State mean India or Sweden, as the context requires; (d) the term person includes an individual, a
company, a body of persons and any other entity which is treated as a taxable
unit under the taxation laws in force
in the respective Contracting States; (e) the term company means any body corporate or
any entity which is treated as a body corporate for tax purposes; (f) the terms enterprise of a Contracting State and
enterprise of the other Contracting State mean respectively an enterprise
carried on by a resident of a Contracting State and an enterprise carried on by
a resident of the other Contracting State; (g) the term international traffic means any
transport by a ship or aircraft operated by an enterprise of a Contracting
State, except when the ship or aircraft
is operated solely between places in the other Contracting State; (h) the term national means : (i) any individual possessing the nationality of
a Contracting State; (ii) any legal person, partnership and association
deriving its status as such from the laws in force in a Contracting State; (i) the term competent authority means :
(i) in India : the
Central Government in the Ministry of Finance (Department of Revenue) or their
authorised representative;
(ii) in Sweden : the
Minister of Finance, his authorised representative or the authority which is
designated as a competent authority for the purposes of this Convention;
(j) the term fiscal
year means :
(i) in the case of
India, previous year as defined under section 3 of the Income-tax Act, 1961;
(ii) in the case of
Sweden, beskattningsar as defined under section 3 of the Kommunalskattelagen,
1928;
(k) the term tax
means Indian tax or Swedish tax, as the context requires, but shall not include
any amount which is payable in respect of any default or omission in relation
to the taxes to which this Convention applies or which represents a penalty
imposed relating to those taxes. 2. As
regards, the application of the Convention by a Contracting State, any term
not defined therein shall, unless the context otherwise requires, have the
meaning which it has under the law of that State concerning the taxes to which
the Convention applies. ARTICLE
4 : Resident - 1. For the purposes of this
Convention, the term resident of a Contracting State means any person who,
under the laws of that State, is liable to tax therein by reason of his domicile,
residence, place of management or any other criterion of a similar nature, and
also includes that State, a political sub-division, a local authority and any
governmental body or agency thereof. In the case of a partnership or estate,
the term applies only to the extent that the income derived by such partnership
or estate is subject to tax in that State as the income of a resident, either
in its hands or in the hands of its partners or beneficiaries. The
term resident of a Contracting State does not include any person who is liable to tax in that State in respect
only of income from sources in that State or capital situated therein. 2. Where
by reason of the provisions of paragraph (1), an individual is a resident of
both Contracting States, then his status shall be determined as follows :
(a) he shall be deemed
to be a resident only of the State in which he has a permanent home available
to him; if he has a permanent home available to him in both States, he shall be
deemed to be a resident of the State with which his personal and economic
relations are closer (centre of vital interests);
(b) if the State in
which he has his centre of vital
interests cannot be determined, or if he has not a permanent home
available to him in either State, he
shall be deemed to be a resident only of the State in which he has an habitual
abode;
(c) if he has an
habitual abode in both States or in neither of them, he shall be deemed to be
a resident only of the State of which he is a national;
(d) if he is a national
of both States or of neither of them, the competent authorities of the
Contracting States shall settle the question by mutual agreement. 3. Where
by reason of the provisions of paragraph 1, a person other than an
individual is a resident of both Contracting States, then it shall be deemed to
be a resident of the State in which its place of effective management is
situated. If the State in which its place of effective management is situated
cannot be determined, then the competent authorities of the Contracting States
shall settle the question by mutual agreement. ARTICLE
5 : Permanent establishment - 1. For the
purposes of this Convention, the term permanent establishment means a fixed
place of business through which the business of an enterprise is wholly or
partly carried on. 2. The
term permanent establishment includes especially :
(a) a place of
management;
(b) a branch; (c) an office; (d) a factory; (e) a workshop; (f) a mine, an oil or gas well, a quarry or any other
place of extraction of natural resources; (g) a sales outlet; (h) a warehouse in relation to a person providing
storage facilities for others; and (i) a farm, plantation or other place where
agricultural, forestry, plantation or related activities are carried on. 3. A
building site or a construction, assembly or installation project or
supervisory activities in connection therewith constitute a permanent
establishment only if such site, project or activities continue for a period of
more than six months. 4. An
enterprise shall be deemed to have a permanent establishment in a Contracting
State and to carry on business through that permanent establishment if it
provides services or facilities in connection with, or supplies plant and
machinery on hire used for or to be used in the prospecting for, or extraction
or exploitation of mineral oils in
that State. 5.
Notwithstanding the preceding provisions of this Article, the term permanent
establishment shall be deemed not to include: (a) the use of facilities solely for the purpose
of storage, display or delivery of goods or merchandise belonging to the
enterprise; (b) the maintenance of a stock of goods or
merchandise belonging to the enterprise solely for the purpose of storage,
display or delivery; (c) the maintenance of a stock of goods or
merchandise belonging to the enterprise solely for the purpose of processing by
another enterprise; (d) the maintenance of a fixed place of business solely
for the purpose of purchasing goods or merchandise or of collecting
information, for the enterprise; (e) the maintenance of a fixed place of business
solely for the purpose of carrying on, for the enterprise, any other activity
of a preparatory or auxiliary character; (f) the maintenance of a fixed place of business
solely for any combination of activities mentioned in sub-paragraphs (a)
to (e), provided that the overall activity of the fixed place of
business resulting from this combination
is of a preparatory or auxiliary character. 6.
Notwithstanding the provisions of paragraphs (1) and (2), where a person -
other than an agent of an independent status to whom paragraph (8) applies - is
acting in a Contracting State on behalf of an enterprise of the other
Contracting State, that enterprise shall be deemed to have a permanent
establishment in the first-mentioned Contracting State in respect of any activities
which that person undertakes for the enterprise, if such a person : (a) has and habitually exercises in that State an
authority to conclude contracts in the name of the enterprise, unless the
activities of such person are limited to those mentioned in paragraph (5)
which, if exercised through a fixed place of business, would not make this fixed
place of business a permanent establishment under the provisions of that
paragraph; or (b) has no such authority, but habitually
maintains in the first-mentioned State a stock of goods or merchandise from
which he regularly delivers goods or merchandise on behalf of the enterprise;
or (c) habitually secures orders in the
first-mentioned State, wholly or almost wholly for the enterprise itself or for
the enterprise and other enterprises controlling, controlled by, or subject to
the same control, at that enterprise.
7.
Notwithstanding the preceding provisions of this Article, an insurance
enterprise of a Contracting State shall, except in regard to re-insurance, be
deemed to have a permanent establishment in the other Contracting State if it
collects premiums in the territory of that other State or insures risks
situated therein through a person other than an agent of an independent status
to whom paragraph (8) applies. 8. An
enterprise shall not be deemed to have a permanent establishment in a Contracting
State merely because it carries on business in that State through a broker,
general commission agent or any other agent of an independent status, provided
that such persons are acting in the ordinary course of their business. However,
when the activities of such an agent are devoted wholly or almost wholly on
behalf of that enterprise, he will not be considered an agent of an independent
status within the meaning of this paragraph. 9. The
fact that a company which is a resident of a Contracting State controls or is
controlled by a company which is a resident of the other Contracting State, or
which carries on business in that other State (whether through a permanent
establishment or otherwise) shall not of itself constitute either company a
permanent establishment of the other. ARTICLE
6 : Income from immovable property - 1.
Income derived by a resident of a Contracting State from immovable property
(including income from agriculture or forestry) situated in the other
Contracting State may be taxed in that other State. 2. The
term immovable property shall have the meaning which it has under the law of
the Contracting State in which the property in question is situated. The term
shall in any case include property accessory to immovable property, livestock
and equipment used in agriculture and forestry, rights to which the provisions
of general law respecting landed property apply, buildings, usufruct of immovable property and rights to variable
or fixed payments as consideration for the working of, or the right to work,
mineral deposits, sources and other natural resources; ships, boats and
aircraft shall not be regarded as immovable property. 3. The
provisions of paragraph (1) shall apply to income derived from the direct use,
letting, or use in any other form of immovable property. 4. The
provisions of paragraphs (1) and (3) shall also apply to the income from
immovable property of an enterprise and to income from immovable property used
for the performance of independent personal services. ARTICLE
7 : Business profits - 1. The profits of an
enterprise of a Contracting State shall be taxable only in that State unless
the enterprise carries on business in the other Contracting State through a
permanent establishment situated therein. If the enterprise carries on
business as aforesaid, the profits of the enterprise may be taxed in the other
State but only so much of them as is attributable to that permanent
establishment. 2.
Subject to the provisions of paragraph (3), where an enterprise of a Contracting
State carries on business in the other Contracting State through a permanent
establishment situated therein, there shall in each Contracting State be
attributed to that permanent establishment the profits which it might be expected
to make if it were a distinct and separate enterprise engaged in the same or
similar activities under the same or similar conditions and dealing wholly
independently with the enterprise of which it is a permanent establishment. 3. In
determining the profits of a permanent establishment, there shall be allowed as
deductions expenses which are incurred for the purposes of the permanent
establishment, including executive and general administrative expenses so
incurred, whether in the State in which the permanent establishment is situated
or elsewhere, in accordance with the provisions of and subject to the
limitations of the tax laws of that State. 4. No
profits shall be attributed to a permanent establishment by reason of the mere
purchase by that permanent establishment of goods or merchandise for the
enterprise. 5. For
the purposes of the preceding paragraphs, the profits to be attributed to the
permanent establishment shall be determined by the same method year by year
unless there is good and sufficient reason to the contrary. 6. Where
profits include items of income which are dealt with separately in other
Articles of this Convention, then the provisions of those Articles shall not
be affected by the provisions of this Article. ARTICLE
8 : Shipping and air transport - 1. Profits
of an enterprise of a Contracting State from the operation of ships or
aircraft in international traffic shall be taxable only in that State. 2.
Profits derived by a transportation enterprise which is a resident of a Contracting
State from the use, maintenance, or rental of containers (including trailers
and other equipment for the transport of containers) used for the transport of
goods or merchandise in international traffic shall be taxable only in that
Contracting State unless the containers are used solely within the other
Contracting State. 3. With
respect to profits derived by the Swedish, Danish and Norwegian air transport
consortium Scandinavian Airlines System (SAS), the provisions of paragraph (1)
shall apply only to such part of the profits as corresponds to the
participation held in that consortium by SAS Sverige AB, the Swedish partner of
Scandinavian Airlines System (SAS). 4. The
provisions of paragraphs (1) and (2) shall also apply to profits from the
participation in a pool, a joint business or an international operating agency. ARTICLE
9 : Associated enterprises - Where : (a) an enterprise of a Contracting State
participates directly or indirectly in the management, control or capital of an
enterprise of the other Contracting State, or (b) the same persons participate directly or
indirectly in the management, control or capital of an enterprise of a Contracting
State and an enterprise of the other Contracting State, and in
either case conditions are made or imposed between the two enterprises in their
commercial or financial relations which differ from those which would be made
between independent enterprises, then any profits which would, but for those
conditions, have accrued to one of the enterprises, but, by reason of those
conditions, have not so accrued, may be included in the profits of that
enterprise and taxed accordingly. Any
case resulting in double taxation from the application of this Article may be resolved under the mutual agreement
procedure. ARTICLE
10 : Dividends - 1. Dividends paid by a
company which is a resident of a Contracting State to a resident of the other
Contracting State may be taxed in that other State. 2.
Notwithstanding the provisions of paragraph (1), such dividends may also be
taxed in the Contracting State of which the company paying the dividends is a
resident and according to the laws of that State, but if the beneficial owner
of the dividends is a resident of the other Contracting State, the tax so
charged shall not exceed 10 per cent of the gross amount of the dividends. This
paragraph shall not affect the taxation of the company in respect of the
profits out of which the dividends are paid. 3. The
term dividends as used in this Article means income from shares or other
rights, not being debt-claims, participating in profits, as well as income from
other corporate rights which is subjected to the same taxation treatment as
income from shares by the laws of the State of which the company making the
distribution is a resident. 4. The
provisions of paragraphs (1) and (2) shall not apply if the beneficial owner of
the dividends, being a resident of a Contracting State, carries on business in
the other Contracting State of which the company paying the dividends is a
resident, through a permanent establishment situated therein, or performs in
that other State independent personal services from a fixed base situated
therein, and the holding in respect of which the dividends are paid is
effectively connected with such permanent establishment or fixed base. In such
case, the provisions of Article 7 or Article 14, as the case may be, shall
apply. 5. Where
a company which is a resident of a Contracting State derives profits or income
from the other Contracting State, that other State may not impose any tax on
the dividends paid by the company, except insofar as such dividends are paid to
a resident of that other State or insofar as the holding in respect of which the dividends are paid is
effectively connected with a permanent establishment or a fixed base situated
in that other State, nor subject to companys undistributed profits to a tax on
the companys undistributed profits, even if the dividends paid or the
undistributed profits consist wholly or partly of profits or income arising in
such other State. ARTICLE
11 : Interest - 1. Interest arising in a
Contracting State and paid to a resident of the other Contracting State may be
taxed in that other State. 2.
However, such interest may also be taxed in the Contracting State in which it
arises and according to the laws of that State, but if the beneficial owner of
the interest is a resident of the other Contracting State, the tax so charged
shall not exceed 10 per cent of the gross amount of the interest. 3.
Notwithstanding the provisions of paragraph (2), interest arising in a
Contracting State shall be exempt from tax in that Contracting State provided
it is derived and beneficially owned by, or derived in connection with a loan or credit extended or endorsed
by : (i) the Government, a political sub-division, a
statutory body, or a local authority of the other Contracting State; or (ii) in the case of India, the Reserve Bank of
India, the Industrial Finance Corporation of India, the Industrial Development
Bank of India, the Export-Import Bank of India, the National Housing Bank, the
Small Industrial Development Bank of India and the Industrial Credit and
Investment Corporation of India (ICICI); and in
the case of Sweden, the Swedish International Development Authority (SIDA),
SWEDECORP (Styrelsen for internationellt
nringslivsbistnd), Swedfund International AB or The Swedish Export
Credits Guarantee Board (Exportkreditnmnden); or (iii) any other institution as may be agreed from
time to time between the competent authorities of the Contracting States. 4. The
term interest as used in this Article means income from debt-claims of every
kind, whether or not secured by mortgage and whether or not carrying a right to
participate in the debtors profits, and in particular, income from Government
securities and income from bonds or debentures, including premiums and prizes
attaching to such securities, bonds or debentures. Penalty charges for late
payment shall not be regarded as interest for the purpose of this Article. 5. The
provisions of paragraphs (1), (2) and (3) shall not apply if the beneficial
owner of the interest, being a resident of a Contracting State, carries on
business in the other Contracting State in which the interest arises, through a
permanent establishment situated therein, or performs in that other State independent
personal services from a fixed base situated therein, and the debt-claim in
respect of which the interest is paid is effectively connected with such
permanent establishment or fixed base. In such case, the provisions of Article
7 or Article 14, as the case may be, shall apply. 6.
Interest shall be deemed to arise in a Contracting State when the payer is a
resident of that State. Where, however, the person paying the interest, whether
he is resident of a Contracting State or not, has in a Contracting State a
permanent establishment or a fixed base in connection with which the
indebtedness on which the interest is paid was incurred, and such interest is
borne by such permanent establishment or fixed base, then such interest shall
be deemed to arise in the State in which the permanent establishment or fixed
base is situated. 7. Where
by reason of a special relationship between the payer and the beneficial owner
or between both of them and some other person, the amount of the interest,
having regard to the debt-claim for which it is paid, exceeds the amount which
would have been agreed upon by the payer and the beneficial owner in the
absence of such relationship, the provisions of this Article shall apply only
to the last-mentioned amount. In such case, the excess part of the payments
shall remain taxable according to the laws of each Contracting State, due
regard being had to the other provisions of this Convention. ARTICLE
12 : Royalties and fees for technical services - 1. Royalties
and fees for technical services arising in a Contracting State and paid to a
resident of the other Contracting State may be taxed in that other State. 2.
Notwithstanding the provisions of paragraph (1), such royalties and fees for
technical services may also be taxed in the Contracting State in which they
arise, and according to the laws of that State, but if the recipient is the
beneficial owner of the royalties or fees for technical services, the tax so
charged shall not exceed 10 per cent of the gross amount of the royalties or
fees for technical services. 3. (a)
The term royalties as used in this Article means payments of any kind
received as a consideration for the use of, or the right to use, any copyright
of literary, artistic or scientific work including cinematograph films, any
patent, trade mark, design or model, plan, secret formula or process, or for
information concerning industrial, commercial or scientific experience. (b)
The term fees for technical services means payment of any kind in
consideration for the rendering of any managerial, technical or consultancy
services including the provisions of services by technical or other personnel
but does not include payments for services mentioned in Articles 14 and 15 of
this Convention. 4. The
provisions of paragraphs (1) and (2) shall not apply if the beneficial owner of
the royalties or fees for technical services, being a resident of a Contracting
State, carries on business in the other Contracting State in which the
royalties or fees for technical services arise, through a permanent establishment
situated therein, or performs in that other State independent personal
services from a fixed base situated therein, and the right or property in
respect of which the royalties or fees for technical services are paid is
effectively connected with such permanent establishment or fixed base. In such
case, the provisions of Article 7 or Article 14, as the case may be, shall
apply. 5.
Royalties or fees for technical services shall be deemed to arise in a
Contracting State when the payer is a resident of that State. Where, however,
the person paying the royalties or fees for technical services, whether he is a
resident of a Contracting State or not, has in a Contracting State a permanent
establishment or a fixed base in connection with which the liability to pay
the royalties or fees for technical services was incurred, and such royalties
or fees for technical services are borne by such permanent establishment or
fixed base, then such royalties or fees for technical services shall be deemed
to arise in the State in which the permanent establishment or fixed base is
situated. 6. Where
by reason of a special relationship between the payer and the beneficial owner
or between both of them and some other person, the amount of the royalties or
fees for technical services, having regard to the use, right or information
for which they are paid, exceeds the amount which would have been agreed upon
by the payer and the beneficial owner in the absence of such relationship, the
provisions of this Article shall apply only to the last-mentioned amount. In
such case, the excess part of the payments shall remain taxable according to
the laws of each Contracting State, due regard being had to the other
provisions of this Convention. ARTICLE
13 : Capital gains - 1. Gains derived by a resident of a
Contracting State from the alienation of immovable property referred to in
Article 6 and situated in the other Contracting State may be taxed in that
other State. 2. Gains
from alienation of movable property forming part of the business property of a
permanent establishment which an enterprise of a Contracting State has in the
other Contracting State or of movable property pertaining to a fixed base
available to a resident of a Contracting State in the other Contracting State
for the purpose of performing independent personal services including such
gains from the alienation of such a permanent establishment (alone or with the
whole enterprise) or of such fixed base, may be taxed in that other State. 3. Gains
derived by a resident of a Contracting State from the alienation of ships or
aircraft operated in international traffic or movable property pertaining to
the operation of such ships or aircraft, shall be taxable only in that State. With
respect to gains derived by the Swedish, Danish and Norwegian air transport
consortium Scandinavian Airlines System (SAS), the provisions of this paragraph
shall apply only to such portion of the gains as corresponds to the
participation held in that consortium by SAS Sverige AB, the Swedish partner of
Scandinavian Airlines System (SAS). 4. Gains
from the alienation of shares of the capital stock of a company the property of
which consists directly or indirectly principally of immovable property
situated in a Contracting State may be taxed in that State. 5. Gains
from the alienation of any property other than that referred to in paragraphs
(1), (2), (3) and (4), shall be taxable
only in the Contracting State of which the alienator is a resident, provided
that such resident is subject to tax thereon in that State. If the resident is
not subject to tax thereon, then such gains may be taxed in the other
Contracting State. 6.
Notwithstanding the provisions of paragraph (5), gains from the alienation of
any property derived by an individual who has been a resident of a Contracting
State and who has become a resident of the other Contracting State, may be
taxed in the first-mentioned State if the alienation of the property occurs at
any time during the four years next following the date on which the individual
has ceased to be a resident of the first-mentioned State. ARTICLE
14 : Independent personal services - 1. Income derived by a
resident of a Contracting State in respect of professional services or other
activities of an independent character shall be taxable only in that State
except in the following circumstances, when such income may be taxed in the
other Contracting State : (a) if he has a fixed base regularly available to
him in the other Contracting State for the purpose of performing his
activities; in that case only so much of the income as is attributable to that
fixed base may be taxed in the other State; or (b) if his stay in the other State is for a period
or periods aggregating 183 days or more in any twelve-month period commencing
or ending in the fiscal year concerned; in that case, only so much of the
income as is derived from his activities performed in that other State may be
taxed in that other State. 2. The
term professional services includes especially independent scientific,
literary, artistic, educational or teaching activities as well as the
independent activities of physicians, lawyers, engineers, architects, surgeons,
dentists and accountants. ARTICLE
15 : Dependent personal services - 1. Subject to the
provisions of Articles 16, 18 and 19, salaries, wages and other similar
remuneration derived by a resident of a Contracting State in respect of an
employment shall be taxable only in
that State unless the employment is exercised in the other Contracting
State. If the employment is so exercised, such remuneration as is derived
therefrom may be taxed in that other State. 2.
Notwithstanding the provisions of paragraph (1), remuneration derived by a
resident of a Contracting State in respect of an employment exercised in the
other Contracting State shall be taxable only in the first-mentioned State if : (a) the recipient is present in the other State
for a period or periods not exceeding in the aggregate 183 days in any
twelve-month period commencing or ending in the fiscal year concerned; and (b) the remuneration is paid by, or on behalf of,
an employer who is not a resident of the other State; and (c) the remuneration is not borne by a permanent
establishment or a fixed base which the employer has in the other State. 3.
Notwithstanding the preceding provisions of this Article, remuneration derived
in respect of an employment exercised aboard a ship or aircraft operated in
international traffic by an enterprise of a Contracting State may be taxed in
that State. Where a resident of Sweden derives remuneration in respect of an
employment exercised aboard an aircraft operated in international traffic by
the Swedish, Danish and Norwegian air transport consortium Scandinavian
Airlines System (SAS), such remuneration shall be taxable only in Sweden. ARTICLE
16 : Directors fees -
Directors fees and other similar payments derived by a resident of a
Contracting State in his capacity as a member of the board of directors of a
company which is a resident of the other Contracting State may be taxed in that
other State. ARTICLE
17 : Artistes and sportspersons - 1. Notwithstanding the
provisions of Articles 14 and 15, income derived by a resident of a Contracting
State as an artiste, such as a theatre, motion picture, radio or television
artiste, or a musician, or as a sportsperson, from his personal activities as
such exercised in the other Contracting State, may be taxed in that other
State. 2. Where
income in respect of personal activities exercised by an artiste or a
sportsperson in his capacity as such accrues not to the artiste or sportsperson
himself but to another person, that income may, notwithstanding the provisions
of Articles 7, 14 and 15, be taxed in the Contracting State in which the
activities of the artiste or sportsperson are exercised. 3. The
provisions of paragraphs (1) and (2), shall not apply to income from activities
performed in a Contracting State by artistes or sportspersons if the visit to
that State is substantially supported by public funds of the other Contracting
State or of a political sub-division or local authority thereof. In such a
case, the income shall be taxable only in the Contracting State of which the
artiste or sportsperson is a resident. ARTICLE
18 : Pensions, social security payments and annuities - 1.
Subject to the provisions of paragraph 2 of Article 19, pensions and other
similar remuneration in consideration of past employment, annuities and
payments under the Social Security legislation arising in a Contracting State
and paid to a resident of the other Contracting State may be taxed in the
first-mentioned Contracting State. 2. The
term annuity means a stated sum payable periodically at stated times during
life or during a specified or ascertainable period of time under an obligation
to make the payments in return for adequate and full consideration in money or
moneys worth. ARTICLE
19 : Government service - 1. (a) Remuneration, other
than a pension, paid by a Contracting State or a political sub-division or a
local authority thereof to an individual in respect of services rendered to
that State or sub-division or authority shall be taxable only in that State. (b)
However, such remuneration shall be taxable only in the other Contracting State
if the services are rendered in that other State and the individual is a
resident of that State who : (i) is a national of that State; or (ii) did not become a resident of that State solely
for the purpose of rendering the services. 2.(a)
Any pension paid by, or out of funds created by, a Contracting State or a
political sub-division or a local authority thereof to an individual in respect
of services rendered to that State or sub-division or authority shall be
taxable only in that State. (b)
However, such pension shall be taxable only in the other Contracting State if
the individual is a resident of, and a national of, that State. 3. The
provisions of Articles 15, 16 and 18 shall apply to remuneration and to
pensions in respect of services rendered in connection with a business carried
on by a Contracting State or a political sub-division or a local authority
thereof. ARTICLE
20 : Students and apprentices - 1. A student or business
apprentice who is or was immediately before visiting a Contracting State a
resident of the other Contracting State and who is present in the
first-mentioned State solely for the purpose of his education or training
shall, besides loans on preferential conditions provided by the Government or
any other organisation or institution of the first-mentioned State and tax
exempt grants and scholarships, be exempt from tax in the first-mentioned State
on : (a) payments made to him by persons residing
outside the first-mentioned State for the purpose of his maintenance, education
or training; and (b) remuneration from employment in the
first-mentioned State, in an amount not exceeding 10,000 (ten thousand) Swedish
Kronor or its equivalent amount during any fiscal year, as the case may be,
provided that such employment is directly related to his studies or is
undertaken for the purpose of his maintenance and that his stay in the
first-mentioned State lasts for six months or more. 2. The
benefit of this Article shall extend only for such period of time as may be
reasonable or customarily required to complete the education or training
undertaken, but in no event shall any individual have the benefits of this
Article for more than five consecutive years from the date of his first arrival
in the first-mentioned State. ARTICLE
21 : Professors, teachers and research scholars - 1. A
professor, teacher or research scholar who visits a Contracting State at the
invitation of that State or of a university, college, school or other such
institution of that State not exceeding three years solely for the purpose of
teaching, giving lectures or carrying out research at such institution and who
is, or was immediately before that visit, a resident of the other Contracting
State shall be exempt from tax in the first-mentioned State, provided that the
institution in question receives approval from the competent authority of that
Contracting State, on his remuneration for such activity during the period of
the first year from the date of his arrival and in the subsequent years, the
exemption will be only in respect of remuneration derived by him from outside
that State. 2. This
Article shall not apply to income from research, if such research is undertaken
primarily for the private benefit of a specific person or persons. ARTICLE
22 : Other income - 1. Items of income of a resident of a
Contracting State, wherever arising, not dealt with in the foregoing Articles
of this Convention shall be taxable only in that State. 2. The
provisions of paragraph (1) shall not apply to income, other than income from
immovable property as defined in paragraph (2) of Article 6, if the recipient
of such income, being a resident of a Contracting State, carries on business
in the other Contracting State through a permanent establishment situated
therein, or performs in that other State independent personal services from a
fixed base situated therein, and the right or property in respect of which the income
is paid is effectively connected with such permanent establishment or fixed
base. In such case, the provisions of Article 7 or Article 14, as the case may
be, shall apply. 3.
Notwithstanding the provisions of paragraph (1), if a resident of a
Contracting State derives income from sources within the other Contracting
State in the form of lotteries, crossword puzzles, races including horse races,
card games and other games of any sort or gambling or betting of any form or
nature whatsoever, such income may be taxed in the other Contracting State. ARTICLE
23 : Capital - 1. Capital represented by immovable property
referred to in Article 6, owned by a resident of a Contracting State and
situated in the other Contracting State, may be taxed in that other State. 2.
Capital represented by movable property forming part of the business property
of a permanent establishment which an enterprise of a Contracting State has in
the other Contracting State or by movable property pertaining to a fixed base
available to a resident of a Contracting State in the other Contracting State
for the purpose of performing independent personal services, may be taxed in
that other State. 3.
Capital represented by ships and aircraft operated in international traffic by
an enterprise of a Contracting State and by movable property pertaining to the
operation of such ships and aircraft, shall be taxable only in that State. With
respect to capital owned by the Swedish, Danish and Norwegian air transport
consortium Scandinavian Airlines System (SAS), the provisions of this Article
shall apply only to such part of the capital as relates to the participation
held in that consortium by SAS Sverige AB, the Swedish partner of SAS. ARTICLE
24 : Elimination of double taxation - 1. The laws in force in
either of the Contracting State will continue to govern the taxation of income
in the respective Contracting States except where provisions to the contrary
are made in this Convention. 2. In the
case of India, double taxation shall be avoided as follows : (a) Where a resident of India derives income
which, in accordance with the provisions of this Convention, may be taxed in
Sweden, India shall allow as a deduction from the tax on the income of that
resident an amount equal to the income-tax paid in Sweden whether directly or
by way of deduction at source. Such amount shall not, however, exceed that part
of the income-tax, as computed before the deduction is given, which is
attributable to the income which may be taxed in Sweden. (b) Where a resident of India derives income
which, in accordance with the provisions of this Convention, shall be taxable
only in Sweden, India may, when determining the graduated rate of Indian tax,
take into account the income which shall be taxable only in Sweden. (c) Where a resident of India owns assets which,
in accordance with the provisions of this Convention, may be taxed in Sweden, India
shall allow as a deduction from tax on such assets an amount equal to the tax
on net wealth paid in Sweden in respect of such assets. Such deduction shall
not, however, exceed that part of the Indian tax on net wealth as computed
before the deduction is given which is appropriate to the assets which may be
taxed in Sweden. 3. In the
case of Sweden, double taxation shall be avoided as follows : (a) Where a resident of Sweden derives income
which under the laws of India and in accordance with the provisions of this
Convention may be taxed in India,
Sweden shall allow - subject to the provisions of the laws of Sweden concerning
credit for foreign tax (as it may be amended from time to time without changing
the general principle hereof) - as a deduction from the tax on such income, an
amount equal to the Indian tax paid in respect of such income. (b) Where a resident of Sweden derives income
which, in accordance with the
provisions of this Convention, shall be taxable only in India, Sweden may, when
determining the graduated rate of Swedish tax, take into account the income
which shall be taxable only in India. (c) Notwithstanding the provisions of
sub-paragraph (a) of this paragraph, dividends paid by a company which
is a resident of India to a company which is a resident of Sweden shall be
exempt from Swedish tax according to the provisions of Swedish law governing
the exemption of tax on dividends paid to Swedish companies by subsidiaries
abroad. (d) For the purposes of sub-paragraph (a)
of this paragraph, the term Indian tax paid shall be deemed to include the
Indian tax which would have been paid but for any exemption or reduction of tax
granted under incentive provisions contained in the Indian law designed to
promote economic development to the extent that such exemption or reduction is
granted for profits from industrial or manufacturing activities or from
agriculture, fishing or tourism (including restaurants and hotels) provided
that the activities have been carried out within India. For the purpose of
sub-paragraph (c) of this paragraph, a tax of 15 per cent calculated on
a Swedish tax base shall be considered to have been paid for such activities
under those conditions mentioned in the previous sentence. The
competent authorities may agree to extend the application of this provision
also to other activities. (e) The provisions of paragraph (d) shall
apply only for the first ten years during which this Convention is effective.
This period may be extended by a mutual agreement between the competent
authorities. (f) Where a resident of Sweden owns assets which,
in accordance with the provisions of this Convention, may be taxed in India,
Sweden shall allow as a deduction from tax on such assets an amount equal to
the tax on net wealth paid in India in
respect of such assets. Such deduction shall not, however, exceed that part of
the Swedish tax on net wealth as computed before the deduction is given which
is appropriate to the assets which may be taxed in India. ARTICLE
25 : Non-discrimination - 1. Nationals of a Contracting State
shall not be subjected in the other Contracting State to any taxation or any
requirement connected therewith, which is other or more burdensome than the taxation and connected requirements to
which nationals of that other State in the same circumstances are or may be
subjected. This provision shall, notwithstanding the provisions of Article 1,
also apply to persons who are not residents of one or both of the Contracting
States. 2. The
taxation on a permanent establishment which an enterprise of a Contracting
State has in the other Contracting State shall not be less favourably levied in
that other State than the taxation levied on enterprises of that other State
carrying on the same activities. This provision shall not be construed as obliging
a Contracting State to grant to residents of the other Contracting State any
personal allowances, reliefs or reductions for taxation purposes on account of
civil status or family responsibilities which it grants to its own residents.
Further this provision shall not be construed as preventing a Contracting State
from charging the profits of a permanent establishment which a company of the
other Contracting State has in the first-mentioned State at a rate of tax which
is higher than that imposed on the profits of a similar company of the
first-mentioned Contracting State, nor as being in conflict with the provisions
of paragraph 3 of Article 7 of this Convention. 3. Except
where the provisions of Article 9, paragraph (7) of Article 11, or paragraph
(6) of Article 12, apply, interest, royalties and other disbursements paid by
an enterprise of a Contracting State to a resident of the other Contracting
State shall, for the purpose of determining the taxable profits of such enterprise,
be deductible under the same conditions as if they had been paid to a resident
of the first-mentioned State. Similarly, any debts of an enterprise of a
Contracting State to a resident of the other Contracting State shall, for the
purpose of determining the taxable capital of such enterprise, be deductible
under the same conditions as if they had been contracted to a resident of the
first-mentioned State. 4.
Enterprises of a Contracting State, the capital of which is wholly or partly
owned or controlled, directly or indirectly, by one or more residents of the
other Contracting State, shall not be subject in the first-mentioned State to
any taxation or any requirement connected therewith which is other or more
burdensome than the taxation and
connected requirements to which other similar enterprises of the
first-mentioned State are or may be
subjected. 5. The
provisions of this Article shall, notwithstanding the provisions of Article 2,
apply to taxes of every kind and description. ARTICLE
26 : Mutual agreement procedure - 1. Where a person considers
that the actions of one or both of the Contracting States result or will result
for him in taxation not in accordance with the provisions of this Convention,
he may, irrespective of the remedies provided by the domestic law of those
States, present his case to the competent authority of the Contracting State of
which he is a resident or, if his case comes under paragraph (1) of Article 25,
to that of the Contracting State of which he is a national. The case must be
presented within three years from the first notification of the action
resulting in taxation not in accordance with the provisions of the Convention. 2. The
competent authority shall endeavour, if the objection appears to it to be justified and if it is not itself able to
arrive at a satisfactory solution, to resolve the case by mutual agreement with
the competent authority of the other Contracting State, with a view to the
avoidance of taxation which is not in accordance with the Convention. Any
agreement reached shall be implemented notwithstanding any time-limits in the
domestic law of the Contracting States. 3. The
competent authorities of the Contracting States shall endeavour to resolve by
mutual agreement any difficulties or doubts arising as to the interpretation or
application of the Convention. They may also consult together for the
elimination of double taxation in cases not provided for in the Convention. 4. The
competent authorities of the Contracting States may communicate with each other
directly for the purpose of reaching an agreement in the sense of the preceding
paragraphs. When it seems advisable in order to reach agreement to have an oral
exchange of opinions, such exchange may take place through a Commission
consisting of representatives of the competent authorities of the Contracting
States. ARTICLE
27 : Exchange of information - 1. The competent authorities of
the Contracting States shall exchange such information (including documents),
as is necessary for carrying out the provisions of this Convention or of the
domestic laws of the Contracting States concerning taxes covered by the
Convention, insofar as the taxation thereunder is not contrary to the Convention,
in particular for the prevention of fraud or evasion of such taxes. The
exchange of information is not restricted by Article 1. Any information
received by a Contracting State shall be treated as secret in the same manner
as information obtained under the domestic laws of that State and shall be
disclosed only to persons or authorities (including courts and administrative
bodies) concerned with the assessment or collection of, the enforcement or
prosecution in respect of, or the determination of appeals in relation to, the
taxes covered by the Convention. Such persons or authorities shall use the
information only for such purposes. They may disclose the information in public
court proceedings or in judicial decisions. 2. In no case shall the provisions of paragraph (1) be
construed so as to impose on a Contracting State the obligation : (a) to
carry out administrative measures at variance with the laws and administrative
practice of that or of the other Contracting State; (b) to
supply information which is not obtainable under the laws or in the normal course
of the administration of that or of the other Contracting State; (c) to
supply information which would disclose any trade, business, industrial,
commercial or professional secret or trade process, or information, the
disclosure of which would be contrary to public policy (ordre public). ARTICLE 28 : Collection assistance - 1. The
Contracting States undertake to lend assistance to each other in the collection
of taxes to which this Convention relates, together with interest, costs, and
civil penalties relating to such taxes, referred to in this Article as a
revenue claim. 2. A request for assistance by the competent authority of
a Contracting State in the collection of a revenue claim shall include a
certification by such authority that, under the laws of that State, the revenue
claim has been finally determined. For the purposes of this Article, a revenue
claim is finally determined when a Contracting State has the right under its
internal law to collect the revenue claim and the taxpayer has no further
rights to restrain collection. 3. An amount collected by the competent authority of a
Contracting State pursuant to this Article shall be forwarded to the competent
authority of the other Contracting State. However, the first-mentioned
Contracting State shall be entitled to reimbursement of costs, if any,
incurred in the course of rendering such assistance to the extent mutually
agreed between the competent authorities of the two States. 4. Nothing in this Article shall be construed as imposing
on either Contracting State the obligation to carry out administrative
measures of a different nature from those used in the collection of its own
taxes or those which would be contrary to its public policy. ARTICLE 29 : Members of diplomatic missions and consular posts
- Nothing in this Convention shall affect the fiscal privileges of members of
diplomatic missions and consular posts under the general rules of international
law or under the provisions of special agreements. ARTICLE 30 : Entry
into force - 1. The Contracting States shall notify each other in
writing, through diplomatic channels, the completion of the procedures required
by the respective laws for the entry into force of this Convention. 2. This Convention shall enter into force thirty days
after the receipt of the latter of the notifications referred to in paragraph
1 of this Article. 3. The provisions of this Convention shall have effect : (a) in
India, (i) in
respect of income arising in any fiscal year beginning on or after the first
day of April next following the calendar year in which the Convention enters
into force; (ii) in
respect of capital which is held on the last day of any fiscal year beginning
on or after the first day of April following the calendar year in which this
Convention enters into force; (b) in
Sweden, (i) in
respect of taxes on income, on income derived on or after the first day of
January of the year next following that of the entry into force of the
Convention; (ii) in
respect of tax on net wealth, for tax which is assessed on or after the second
calendar year following that in which the Convention enters into force. 4. The Convention of 7th June, 1988, between the
Government of the Republic of India and the Government of the Kingdom of Sweden for the Avoidance of
Double Taxation and the Prevention of Fiscal Evasion with respect to taxes on
income and on capital with Protocol shall terminate upon the coming into force
of this Convention and accompanying Protocol. The provisions of the said 1988
Convention with Protocol shall cease to have effect from the date on which the
corresponding provisions of this Convention and accompanying Protocol shall,
for the first time, have effect according to the provisions of paragraph 2 of this
Article. ARTICLE
31 : Termination - This Convention shall remain in force until
terminated by a Contracting State. Either Contracting State may terminate the
Convention, through diplo-matic
channels, by giving written notice of termination at least six months before the end of any calendar year. In such
case, the Convention shall cease to have effect : (a) in India, (i) in respect of income arising in any fiscal
year beginning on or after the first day of April following the calendar year
in which the notice of termination is given; (ii) in respect of capital which is held on the
last day of any fiscal year beginning on or after the first day of April
following the calendar year in which the notice of termination is given; (b) in Sweden, (i) in respect of taxes on income, on income
derived on or after the first day of January of the year next following the end
of the six months period; (ii) in respect of tax on net wealth, for tax
which is assessed in or after the second calendar year following the end of the
six months period. In
witness whereof the undersigned being duly authorised thereto have signed
this Convention. Done in
duplicate at New Delhi, this 24th day of June, 1997, in the Swedish, Hindi and
English languages, all three texts being equally authentic. In case of
divergence between the texts the English text shall be the operative one. PROTOCOL At the
signing of the Convention between the Government of the Republic of India and
the Government of the Kingdom of Sweden for the avoidance of double taxation
and the prevention of fiscal evasion with respect to taxes on income and on
capital, the undersigned have agreed that the following shall form an integral
part of the Convention : With
reference to Article 2 : The
fees paid under the Swedish Social Security Legislation and according to the
provisions of the Act (1990 : 659) on Special salary tax on earned income and
the Act (1991 : 687) on Special salary tax on pension costs are not included in
this Convention. With
reference to Article 7 : In
respect of paragraphs (1) and (2) of Article 7, where an enterprise of one of
the Contracting States sells goods or merchandise or carries on business in
the other Contracting State through a permanent establishment situated therein,
the profits of that permanent establishment shall not be determined on the
basis of the total amount received by the enterprise, but shall be determined
only on the basis of the remuneration which is attributable to the actual
activity of the permanent establishment for such sales or business.
Especially, in the case of contracts for the survey, supply, installation or
construction of industrial, commercial or scientific equipment or premises, or
of public works, when the enterprise has a permanent establishment, the profits
of such permanent establishment shall not be determined on the basis of the
total amount of the contract, but shall be determined only on the basis of that
part of the contract which is effectively carried out by the permanent
establishment in the Contracting State where the permanent establishment is
situated. With
reference to Articles 10, 11 and 12 : In
respect of Articles 10 (Dividends), 11 (Interest) and 12 (Royalties and fees
for technical services) if under any Convention. Agreement or Protocol between India and a third State
which is a member of the OECD, India limits its taxation at source on
dividends, interest, royalties, or fees for technical services to a rate lower
or a scope more restricted than the rate or scope provided for in this
Convention on the said items of income, the same rate or scope as provided for
in that Convention, Agreement or Protocol on the said items of income shall
also apply under this Convention. With
reference to Article 25 : The
taxation in India of permanent establishments of Swedish companies, shall in no
case differ more from the taxation of
similar Indian companies than is provided by the Indian law on the date of
signature of this Convention. In witness whereof the undersigned being duly
authorised thereto have signed this Protocol. Done in duplicate at New Delhi, this 24th day of June,
1997, in the Swedish, Hindi and English
languages, all three texts being equally authentic. In case of divergence
between the texts the English text shall be the operative one. Judicial analysis See Ericsson Telephone Corpn. India
v. CIT [1997] 90 Taxman 144 (AAR - New Delhi).
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